The Need to Invest

Before we act and invest, there should always be a need that it addresses. In this article my good friend and Registered Financial Planner Edmund Lao will share on the “Need to Invest”

Investment : A monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price. – Investopedia

In layman’s term, an investment is putting something like time, money or effort into a business opportunity, information, or items in the hope of making more money.

From the internet, there are many topics related to investment and most of the time, the topics always involve the method or strategy in doing it. However, in investing, a big factor depends on the behavior and mindset of the individual. Most of the time, there are those who ask sarcastically “Why do I need to invest?”.

Personal finance is 80% behavior and 20% skill. Going by that logic, if people know the WHY, then the HOW will not be so much of a problem.

Why do we need to invest?

1. We change. If you have watched Rocky IV, there was a scene where Rocky and Apollo were discussing about an exhibition fight with Ivan Drago. Rocky said “We change. We are not what we used to be.” He is right. Change is constant. Our bodies change, we age and nothing can stop time from moving forward. Time will come that we will become weak and sickly and unable to produce income as compared to our productive years. On our golden years, we run the risk of being a liability to our children if we retire broke. It must be noted that the only person who can take care of us in our old age is our younger self. By planning ahead and investing early in life, we can make money work for us later in life and become a blessing to our children.

2. Inflation exists. Inflation is defined as the rise in price of goods and services. Inflation currently averages 5% a year and if we do not invest, there will come a time that the money we saved will not be enough to buy the things we need. We must look for investment instruments that give a return higher than inflation.

3. Taxation. Tax is another resistance to our wealth. From our birth to our death, we are taxed. We have no choice but to pay so that the government can serve us back. Taxes are deducted from our salary and automatically becomes part of our non-discretional expenses. The only way to counter-act the effect of taxation is to invest a portion of the net salary. In the future, the invested money can produce money without any effort and can offset the effect of taxation.

4. Retirement. Retirement, unknown to many, is a function of net worth and not age. A lot of people erroneously correlate retirement to a ripe old age of 60. The earlier you build your wealth, the earlier you retire. However, retirement does not mean that one will be idle. Retirement just meant that you are already ending your contract as a corporate slave and that you have gained your independence without having to worry about money. This is also the time you can pay forward and give back to the society.

5. Patriot. By investing, you are contributing to the progress of a country. There are various instruments that help generate jobs, generate tax for the government, helps companies with their expansion which all lead to improvement of economy. A rich country is composed of rich citizens. And this can only happen if all citizens are converted to INVESTizens.

6. God wants us to prosper. This is the most important reason why we need to invest. Our God is a rich God. He does not want us to be poor. For that reason, He gave us the Bible where there are parables about money management to guide us. Just as our earthly father keeps us safe from harm our Heavenly Father is no different. God will continue to show us the way to prosper and because of His goodness we respond and take action.